China’s new loans hit record in Q1 as banks front-load lending

CHINA’S new bank lending hit an all-time high in the first quarter of 2023, as the authorities kept policy accommodative and encouraged banks to lend more to businesses to support economic recovery after the lifting of stringent Covid-19 curbs.

The world’s second-largest economy has rebounded from pandemic disruptions, driven by consumption and infrastructure. In March, the central bank cut banks’ reserve requirement ratio (RRR) for the first time this year, in a bid to spur credit growth.

This, and the fact that lenders tend to front-load lending early in the year, pushed bank loans in the first quarter to a record of 10.6 trillion yuan (S$2.05 trillion). The figure rose 27 per cent from the first quarter of 2022, which was the previous record.

For March, banks extended 3.89 trillion yuan in new yuan loans. Data from the People’s Bank of China on Tuesday (Apr 11) showed that this was more than double February’s tally of 1.81 trillion yuan, and surpassed analysts’ expectations. Analysts polled by Reuters had predicted new yuan loans would rise to 3.24 trillion yuan last month. The new loans also beat the year-ago figure of 3.13 trillion yuan.

Beijing’s lifting of its zero-Covid policy in December and other measures have started to rekindle credit demand, though there are fears the momentum could fade.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, said: “Credit supply turns out to be much stronger than expected in March. The credit impulse in Q1 indicates that growth will likely rebound strongly in the coming quarters.”

Household loans, mostly mortgages, jumped to 1.24 trillion yuan in March from 208.1 billion yuan in February. Corporate loans also booked an increase, rising to 2.7 trillion yuan from 1.61 trillion yuan.

Several small and mid-sized banks in China have lowered their deposit rates, a move that could ease costs as loan growth faces more pressure amid rising economic risks.

Broad M2 money supply grew 12.7 per cent in March from a year earlier, data showed, matching the estimate derived from the Reuters poll. M2 rose 12.9 per cent in February.

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Outstanding yuan loans grew 11.8 per cent in March from a year earlier, compared with 11.6 per cent year-on-year growth the previous month. Analysts had expected 11.7 per cent growth. Outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, grew 10 per cent in March year on year, quickening from 9.9 per cent in February.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In March, TSF rose to 5.38 trillion yuan from 3.16 trillion yuan in February. Analysts polled by Reuters had expected March TSF of 4.5 trillion yuan. REUTERS